Business Metrics Lesson: Terminology and Formulas
Metric
Formula
Marketing
Click through rate (CTR)
(Clicks/ Impressions) * 100
Cost Per Click (CPC)
Cost of advertising on the source platform / Number of
people who clicked on that ad
Cost Per Lead (CPL)
Cost of advertising on the source platform / Total
number of leads
Customer Acquisition Cost
(CAC)
(Total marketing expenses + total sales expenses and
salaries)/ # of customers acquired
Marketing & Financial
Cost Per Acquisition (CPA)
(Marketing and Sales Cost)/ number of new leads
customers
Life Time Value (LTV)
Average Sale Revenue x Number of Repeat Sales x
Expected Retention Time x Profit Margin
Average Sale Revenue
(Total customer revenue/ Number of purchases in the
cycle)
Total Sale Revenue Per Cycle
Revenue earned from customer per purchase cycle
Number of Sales Per Purchase
Cycle
Number of times customer buys during the purchase
cycle
Commonly Used
Alternate Terms
Cost Per Acquisition
(Cost of marketing and sales)/ number of new leadsk
Expected Retention Time
Amount of time (measured in purchasing cycles) you
expect to retain the customer.
Average Sale Revenue
(Total customer revenue/ Number of purchases in the
cycle)
Profit Margin (%) Per Customer
((Average Sale - Average Cost of Sale) / Average
Sale) x 100
Sales
Bookings
Total Number of Bookings x Average Sale value of
Transaction
Sales Bookings
Average Size of Deal in Pipeline
Total ($) Sale Value of Deals or Orders / (#) of Orders
over a Specific Period = ($) Average Deal Size
Average Purchase Value
Average Time to Close Deal
Total number of days for all sales combined / Number
of deals
Deal Velocity
Growth
Stickiness
Daily Active Users/ Monthly Active Users
Churn rate
(Customers beginning of usage interval - Customers
end of usage interval) / Customers beginning of usage
interval
Financial
Revenue
Money that a company makes from the sales of its
products and services
Cost of Goods Sold
Direct costs the company incurs to develop and
product the product or service being sold
Cost of Sales
Cost of Revenue
Gross Profit
Revenue - Cost of Goods Sold
Selling, General and
Administrative expenses
Selling, General and Administrative expenses
Marketing, sale commissions and salaries for office
staff, supplies, computers, legal expenses, rent,
utilities, taxes and interests on any loans). SG&A
typically exclude research and development
expenses.
Total Operating Expenses
Expenses incurred outside of direct manufacturing
costs
Operating Profit
Gross Profit - Total Operating Expenses
Operating Income, Earnings
Before Interest and Tax
(EBIT)
Net Profit
Operating Profit - (Interest + Taxes)
Net Income
Gross Margin
(Total Sales Revenue – Cost of Goods Sold) / Total
Sales Revenue
Contribution Margin
(Revenue - Variable Costs) / Total units sold
Operating Expenses